Switzerland – EU: A relation of equals?

Legal certainty in good faith looks somewhat different

by Dr iur Marianne WÅthrich

A contract is usually concluded when both parties are convinced that it will benefit them and longer-term contracts are maintained as long as the partners want to continue. In principle, this applies to agreements between sovereign states, and it also applied to relations between Switzerland and the European Community for a long time. In 1972, for example, Switzerland, together with the other EFTA states, concluded a free trade agreement with the EEC (excluding agricultural products1), an agreement of equals, which is still in force today. However, on 7 February 1992, with the treaty on the European Union (Treaty of Maastricht), the EC took a course towards the “ever closer union”, which was intended from the outset, and subsequently developed its legal structure and its administration towards a monstrous centralised bureaucracy. Accordingly, the two-pronged EU Commission and the European Court of Justice increasingly behaved as absolute rulers. Also Switzerland has felt the same effect since the sovereign said ‘no’ to its accession to the EEA, over 25 years ago, on 6 December 1992. In any case, what the EU sometimes expects us to accept is more like a power relation than a contractual relationship. And, I am sorry to add, our Federal Councillors involved don’t seem to mind this, as long as they are all smiling in front of the cameras jointly with the masteries. But if, as is currently the case, there are harsher sounds coming out of Brussels, they are indignant – even though every experienced Swiss politician or negotiator knows very well how the EU head office works. And also knows that the Swiss people, with their strong desire for independence and their commitment to direct democracy, especially in matters of foreign policy, cannot be integrated into the EU structure.

At present, we are talking about new cohesion billions and the institutional framework agreement – and again and again about massive pressure attempts on the part of the EU, sanctions in breach of contract and breach of promises, as it is not the custom among reliable contractual partners. The more compliant Switzerland is, the more arbitrary the “measures” of the hegemon in Brussels. Not any sign of legal certainty.

On 23 November 2017, EU Commission President Jean-Claude Juncker visited Switzerland. In the publicly accessible fragments of the media conference2, the President of the Swiss Confederation Doris Leuthard and the President of the European Commission Jean-Claude Juncker made brief statements focusing on two main areas: the omnipresent institutional framework agreement and the payment of 1.3 billion Swiss francs into the European Cohesion Fund, which the Federal Council has generously pledged, even though it is not the ultimate authority (see below). No wonder, Mr Juncker was in the best of moods when he stated in front of the media:” I am glad that we have succeeded in finding on the side of Switzerland a solution to the issue of the free movement of persons, which is such that we find it sympathetic […]”. A masterful formulation: We – that is to say, the EU leaders – have succeeded in getting the Federal Council and the majority of the parliament to vote for the EU-compatible “priority for nationals light”. And if the Swiss continue to adhere to the Brussels guidelines in the future – but only then – Juncker & Co will continue to find them sympathetic.

… and how quickly the “friendship” can be over

Jean-Claude Juncker at the press conference on 23 November 2017: “We talked about the framework agreement – actually a terrible non-word, de facto it’s rather a kind of friendship treaty – between Switzerland and the European Union” [emphasis mw]. As long as the negotiations continue, he could not provide any further information on the progress made, but “all this is moving in the right direction”. (SRF News from 23.11.2017)Well, the newly evoked friendship lasted only a few weeks: Since mid-December 2017, all the sudden the EU’s leaders – after years of negotiations – do not see sufficiently fast progress in the negotiations on the framework agreement. Do Brussels’ troubles with the Brexit play a role? Doris Leuthard, who wanted to crown her presidential year with the Juncker visit, had certainly not expected such a rapid change “from thaw to ice age” (“Blick” from 23.12.2017).This time, Brussels took a means of pressure out of the drawer to hurt the Swiss financial centre. Although, in his media statement of 23 November, Jean-Claude Juncker made a verbatim promise in return for Switzerland’s good conduct and the cohesion billions promised by the Federal Council as an advance, so to speak: “We also intend to discuss the recognition of the equivalence of the Swiss stock market regulation in the Commission in December. Switzerland needs this declaration in order to be able to do securities trading throughout Europe. That’s what we do during the month of December.” (SRF News from 23.11.2017)These words were probably rather hasty: on 20 December it became known that the EU Commission and the European Council only wish to grant the Swiss stock exchange access to EU securities trading on a provisional basis, until the end of 2018. This is in contrast to other countries, such as the USA, whose access to EU securities trading is not subject to any conditions. (see daily press from 20/21 December) A pure harassment, creating also additional cost, because Swiss securities traders would have to involve an intermediary, such as a bank in an EU country. However, as has already been publicised, the lack of recognition of the Swiss stock exchange rules would also harm traders in the EU – they also want uncomplicated stock exchange transactions with Switzerland. In order to increase pressure, the EU also put the Swiss financial centre on a grey list since 5 December, as a late reaction to the Swiss voters ‘no’ on 12 February 2017 on corporate tax reform III. At that time, they said ‘no’ to the levelling of cantonal tax rates, whose federalist diversity had branded Brussels as a distortion of competition. Also here: No sign of legal certainty. The EU power structure and Switzerland, with its direct democratic and federalist structure, are as different as fire and water.The Federal Council pledges 1.3 billion to the cohesion fund to the EU without anything in return – not really!At the media conference from 23.11.2017, the Federal Council announced that Switzerland was to pay another 1.3 billion Swiss francs in cohesion money to the EU, 200 million Swiss francs for migration and the “rest” (after all, 1.1 billion Swiss francs of our taxpayers’ money) for vocational training and against youth unemployment in the Eastern European EU states. Doris Leuthard: “Not in the light of political interests but in the light of all the good relations and because the situation has now effectively stabilised and developed positively this year, the Federal Council acts this way.” (SRF News from 23.11.2017)That can’t be true: giving billions of euros of tax money to a tough opponent of the treaty without claiming anything in return? For a patronising – and not very sustainable – pat on the back by Mr Juncker, “in the light of all the good relations”? Are our Federal Councillors that naive?Now that the EU has moved away from its velvety course in lightning speed and has shown its claws, various Federal Councillors are hurrying to put their promise into perspective. On a positive note, the new Head of the FDFA, Ignazio Cassis, on his inaugural visit to Paris, rejected the combination of the framework agreement and the recognition of the Swiss stock exchange regulation, as well as Switzerland’s placement on a grey EU list and questioned the cohesion payment. Members of parliament from various political groups, including the SP, also expressed their views in the same spirit.3It is not that we are opposed to helping the young people in Eastern Europe so that they can do an apprenticeship. But we are resolutely resisting the fact that we are being driven further and further into the EU’s centralist and undemocratic colossus – and on top of that, we should hand over our good money?

Direct democracy needs time, and the final outcome is open

The executives have little power in the Swiss state model at all three levels of government, a constant nuisance for the EU proponents in the federal administration. In fact, the Federal Council is not formally entitled to commit to either a cohesion billion or a framework agreement. This is probably difficult to understand for the EU-bodies, unfamiliar with Swiss democratic rules. The Federal Council’s task would be to make the direct democratic Swiss model clear in Brussels and to appoint negotiators who are fully supporting it.

Whether and how much Switzerland wants to pay into the EU Cohesion Fund is up to the National Council and the Council of States. According to Article 10 of the Law on Assistance to Eastern Europe, the parliament may decide to finance support measures for Eastern European states without the possibility of a referendum.4

The parliament also decides on the conclusion of bilateral agreements with the European Union. Voters, on the other hand, can vote on it in an optional referendum, which will certainly be the case with the framework agreement. This is also the reason why the negotiating teams from Berne and Brussels do not get on for years, more or less. Although the content of this ominous agreement has not been disclosed to date, some of the most important cornerstones have long been known (see box below). It is considered certain that the agreement, which would reduce the direct democratic rights of the Swiss to a small percentage, would be rejected by the people at the ballot box. That’s why our federal councillors are rather walking on egg shells, like Doris Leuthard during the visit of Junckers on 23 November: “In two or three areas there are still differences [without revealing in which areas, mw], but today’s discussion has shown” that both sides do want this framework agreement [...]”. (SRF News from 23.11.2017) - well knowing that one side, namely the Swiss voters, most likely just do not want it...

Once the framework agreement has been signed by the Federal Council, it would take several years to reach a final decision: starting with the Federal Council’s message to the parliament, through the parliamentary commissions to the parliamentary debates, alternately in the National Council and Council of States, and finally through the 100-day referendum period to the plebiscite.

Freedom or prosperity – a contrast?

We Swiss people would have to decide whether we wanted freedom or prosperity, according to a newspaper commentary these days. Either we keep our independence and pay the price of limited market access to the European Union. Or we are fully involved in the EU’s internal market, accepting the dictates of the EU’s legal system and the supervision by the European Court of Justice. A difficult choice for us who want to have both, freedom and prosperity.There are several objections to this argumentation. First of all, it is not true that the economies of the member states that are fully surrendering themselves to the EU are doing better. On the contrary, many countries are getting worse today, after they formerly used to have their own currency and the freedom to trade and make agreements with whomever they wanted. And the more prosperous states will be milked, because the whole bureaucratic structure and the high wages and salaries of civil servants, judges and parliamentarians and so on must be paid. Not to mention feeding the bottomless funding programmes, the interest rates on the huge debts and many other programmes costing billions of dollars. We Swiss, on the other hand, in spite of many adversities, have still retained some freedom to shape our country and our economy as we like. This is mainly due to our federalism and the direct democratic rights of citizens. Not only our freedom, but also our prosperity are closely linked to these indispensable foundations of Switzerland. EU supporters like to state that our prosperity is above all the result of the bilateral treaties. Answering to this, it must be said that Switzerland, as a landlocked country with few natural resources, naturally needs trade and cultural exchange with the other countries of Europe and the world. Switzerland has always been a cosmopolitan country. But as a sovereign state, we expect our contractual partners to treat us with integrity and to abide by good faith.5The fact is that we are doing so well in economic terms, above all because the people of the Confederation, the cantons and the communes determine their own fate. Switzerland is one of the few European countries that complies with the Maastricht rules (without having to). Like our political system, our currency is one of the most stable and secure, which is why smaller or larger savings from abroad continue to flow into Swiss banks, despite the fact that we have been forced to abolish our bank secrecy. Despite the strong Swiss franc, Swiss companies are doing even better today than they did a few years ago, and despite the high level of immigration from the EU member states, youth unemployment is still record low, primarily because of the deep anchoring of dual vocational training in companies and among citizens.Finally, many citizens in EU member states also have urgent questions that need to be taken seriously: How can it be that such an important project as the European Union – which, as we all know, aims at peaceful coexistence of peoples – incapacitates its own members to such an extent that they can no longer regulate their own affairs themselves? How can it be that the parliaments of the member states have little more to do, because more and more law is being set in Brussels? What kind of group of nations is it that takes such a grasp on a state that is willing to leave, so that no one else has the idea of doing the same? Freedom or prosperity? Do the EU member states have a choice? •

1 Agreement between the European Economic Community and the Swiss Confederation of 22 July 1972, entered into force on 1 January 1973.2 Swiss-EU relations. Live ticker on the Juncker and Federal Councils meeting. SRF News from 23.11.20173 “Cassis speaks plain text in Paris”, sda-message from 20.12.20174 Federal Law on Assistance with the States of Eastern Europe of 24 March 2006, adopted by the peoples vote on 26.11.2006 as a basis for the payment of the first cohesion billion over a period of ten years. On 30.9.2016 it was extended by the parliament without the referendum being taken. 5 Incidentally, our positive external trade balance is mainly based on trade with non-EU countries, because we import far more goods and services from EU countries than we export to them.

To the content of the institutional framework agreement

mw. According to the homepage of the Federal Department of Foreign Affairs (FDFA), what is known today:1 Firstly, the framework agreement includes Switzerland’s obligation to take over the entire EU legal development in all areas governed by more than 100 bilateral treaties. If we consider the two momentous electrical power agreements and agricultural agreements (agriculture, food safety, product safety, public health) pre-tracked by the Federal Council, as well as the already existing integration of neutral Switzerland into the European Security and Defense Policy, almost all important legal areas would be affected. Second point is the monitoring of application of the agreements by EU bodies (especially the Commission). If they believe that Switzerland would not comply with EU law on one point, they would appeal to the European Court of Justice (ECJ), whose interpretation of EU law is thirdly, binding and fourthly, would ultimately decide. This means that EU law would be above Swiss law. The so-called EFTA Court, the “little brother of the ECJ” set up by the EU, is also sometimes discussed to ensure the parallel application of the EU-Acquis to the EEA countries Norway, Iceland and Liechtenstein. It does not really matter whether a Swiss judge is sitting there: Judges judging Switzerland on the basis of foreign law, remain foreign judges. To be continued as soon as the contract contents are on the table.

1FDFA, Switzerland’s European policy, negotiations and open issues (as of May 2016)